Dangote: Raising the white flag for a billionaire’s grand entry
SOMETHING made our political leaders look good last week: Africa’s billionaire businessman, Aliko Dangote, visited the capital and promised to pump huge cash into the country for several projects, including the biggest cement manufacturing plant in the region.
It was a rare opportunity in which a non-politician was allowed to steal the limelight from his political hosts.
Dangote met President Robert Mugabe, his two Vice-Presidents — and Phelekezela Mphoko — and several Cabinet ministers with the usual opportunity for photo shoots.
That honour has not been afforded Zimbabwe’s own richest man, Strive Masiyiwa, proprietor of Econet Wireless Zimbabwe.
Hounded out of the country and now living in exile, Masiyiwa’s Econet indicated a few weeks ago that it’s various ventures had resulted in the creation of over 60 000 jobs in the national economy, and that it had invested over US$1,2 billion into the domestic economy in the last seven years.
Astute businessman, Mutumwa Mawere — said by colleagues within the business community to have a sharp eye for opportunity and profit — is also in far away South Africa, unable to contribute to the country’s economy after the State seized most of his assets after an alleged political fallout.
Nonetheless, the Nigerian mogul provided a dosage of good news in a country experiencing unprecedented company closures and job losses after ditching its defenceless currency for a hard currency regime in 2009.
Before that, the economy had evidently been equally in ruins: widespread electricity blackouts and commodity shortages hit the country, and the domestic currency suffered daily erosion of value.
The Zimbabwe Stock Exchange (ZSE), normally a barometer of the health of the economy, soared as people sought to escape the assault on the local currency.
The foreign currency black market thrived as people again sought to escape from the Zimbabwe dollar.
Others invested in real estate, anxious to preserve their wealth.
During that period, in which the country endured its worst economic crisis in history between 2000 and 2008, sustained and broad-based economic decline led to a cumulative shrinkage of nearly 50,3 percent in real gross domestic product (GDP).
While the current difficulties may not be as bad as it was during the hyperinflationary crisis, the situation may indeed be getting even more severe, despite the fact that supermarkets are brimming with an assortment of imported commodities and there is abundant fuel at pump stations.
But the availability of commodities on the market is as far as the current situation may be flattering.
The ZSE lost US$1 billion in the first half of this year, and continues to struggle.
At least 20 companies on the domestic bourse have de-listed or collapsed since 2009.
The majority — about 60 firms — are technically insolvent.
Unofficial estimates indicate that structural unemployment is now at over 90 percent.
Hordes of the unemployed resorted to vending to eke out an honest living. But when they overwhelmed the country’s cities and towns, government and local authorities pitilessly flushed them out.
Although crime statistics are not readily available, there is a perception vice and crimes are soaring due to increasing poverty. Police have previously reported a marked surge in armed robberies and murders.
So Dangote came essentially as a rescue package to a leadership desperate to be seen doing something to salvage the situation.
In his meeting with President Mugabe, Dangote promised to pour in over US$1 billion for a power generation plant, a coal mine and a cement manufacturing plant.
There were no details about the planned projects, except that the cement manufacturing plant is expected to cost US$400 million and would be much bigger than all the plants held under Dangote Cement.
“We had a very, very good meeting with the President and I briefed him that we have already decided to invest in three areas,” Dangote told journalists soon after his meeting with President Mugabe.
The three projects, he said, would commence early next year but this would depend on the issuance of relevant permits, for which he said government had already promised to “accelerate” all approvals.
This, apparently, contrasts sharply with the treatment given to Essar Africa Holdings, an Indian conglomerate hounded out of a planned US$750 million investment into the Zimbabwe Iron and Steel Company after failure by government agencies to facilitate release of mineral concessions that had been part of a transaction sanctioned by President Mugabe.
Had that deal been nurtured, it had the potential to reinvigorate the economy, creating thousands of jobs and downstream industries.
So Dangote should surely be a lucky billionaire; his departure was immediately followed by an announcement that President Mugabe’s Cabinet had sanctioned his investment plans, and that all organs of government had been instructed to facilitate the quickest approval of requisite permits.
Hurriedly, Dangote dispatched a five-member team led by Abdu Mukhtar, a chief strategist for Dangote Group, to evaluate progress this week.
Mukhtar, whose team included a lawyer and a geologist, said they would “meet every official necessary” to get the requisite approvals for the planned projects.
In typical Dangote stubbornness, the billionaire investor indicated that he did not know yet where he would place his cement manufacturing plant, or the coal mine, and simply told journalists these would be in an area with massive deposits of limestone, gypsum and coal.
Cunningly, his message suggested that it was government’s business to find a place for him to invest in the country; his responsibility was to find money to ensure his projects create jobs and help grow the country’s economy.
“Our team will be back into the country next week to execute this plan and what we have already planned to do in terms of investment, to create jobs and also to help Zimbabweans to develop their own economy,” said Dangote, laying down his brief.
Now, how do you handle an investor who tells you he is coming to create jobs for you, to help you develop your economy?
Do you ask that investor to take it easy, and inform him that you have an indigenisation programme under which he has to give up a controlling 51 percent stake to an indigenous black Zimbabwean?
Dangote’s radical views on indigenisation are a matter of public record.
Two years ago, he lambasted South Africa’s black economic empowerment (BEE) programme, saying it was driving away investment.
“In Nigeria, we had these laws demanding that any (foreign) investor had to have a Nigerian partner. But that just dried up the capital flows. Now anyone can do business with anyone in Nigeria,” Dangote told South Africa’s Business Day in 2013.
He advised: “The whole world needs capital. If you make it difficult for me to invest in one country then I will move my capital somewhere else where it is easier to invest.”
The black economic empowerment programme in Zimbabwe has been more controversial and painful for foreigners than South Africa’s BEE, which has been able to get funding from banks and other financing arrangements.
Zimbabwe’s controversial Indigenisation and Economic Empowerment Act was passed by Parliament towards the end of 2007, and gazetted on March 7, 2008.
It was signed into law on April 17, 2008.
It provides for all foreign-owned companies operating in Zimbabwe to cede at least 51 percent of their shares or interests to indigenous blacks.
According to the indigenisation law, locals must control at least 51 percent shareholding in all foreign-owned companies operating in Zimbabwe.
Although there have been concessions to a few recent transactions involving foreign firms, the law still subsists and has discouraged foreign investment in the country.
It was interesting that Dangote did not publicly talk about this legislation when discussing his planned investments, but there are suggestions from political corridors that government agreed to look the other side to avoid spoiling a good opportunity.
But how did we get to this?
In a normal environment, President Mugabe would have asked Dangote to look for fellow businessmen if he wanted to invest in the country; the tycoon would have been referred to the various State institutions dealing with his investment plans.
But Dangote understood Zimbabwe’s desperation: After years of prevarication and rhetoric, the country’s rulers have suddenly awoken to the rude reality that the economy is sinking faster down the abyss.
The economy is this year expected to contract, although Finance Minister Patrick Chinamasa projects it to grow by 1,5 percent, from initial forecasts of a moderate growth rate of 3,2 percent.
There are already tell-tell signs of an unprecedented humanitarian and social crisis.
Government is currently confronted by unprecedented fiscal pressure, and has been battling to raise monthly salaries for its workforce.
In his recent statements, President Mugabe has indicated that his government would be more amenable to investment by foreigners, although he did not say if this meant ditching the indigenisation campaign his party used to secure a landslide victory at the August 2013 polls.
But as this newspaper has reported previously, government has climbed down on the indigenisation programme but is embarrassed to publicly admit it.
Dangote may not necessarily want to hear that from a third party; this may have been his first question to President Mugabe when he was taken to him by Mnangagwa, who appeared to have played a significant role in securing the businessman’s appointment with the President.
Mnangagwa personally suggested in February that government would realign the country’s indigenisation law to make it more investor-friendly.
He said he had “met various investors who have all expressed interest in investing in the country” but remained concerned by the indigenisation programme and lack of policy consistency.
Dangote may have been one of those “various investors”.